Health check: Will Medicare’s 40th birthday be a happy one?

Most of us take for granted the yellow-and-green Medicare card we carry in our wallets. But Australia’s universal health scheme, introduced by the Hawke-Keating government in 1984, had a difficult birth.

Then Queensland premier Joh Bjelke-Petersen refused to sign up to the scheme for the first six weeks of its operation, as he believed his state was being short-changed on hospital funding.

We have come to take the yellow-and-green Medicare card for granted, but its birth was a troubled one. Credit:Getty Images

Specialist doctors in hospitals across the ACT, NSW and then Victoria went on strike for two months over powers handed to then health minister, Neal Blewett, to ensure doctors treating patients in private hospitals charged no more than the scheduled fee.

Fast-forward to today and Medicare is a vital part of the Australian social compact. Labor’s “Mediscare” campaign during the 2016 election, alleging the Turnbull government was considering partially privatising the system, underscored just how much Australians value their health provision.

Reflecting on the scheme’s introduction, Paul Keating says: “It has now gone close to 40 years and we all know if you end up in strife of any kind you are so grateful for it. Along with national superannuation, Medicare was a new Australian community standard.

“The underlying principle of Medicare was the health of any one of us should be important to all of us.”

Paul Keating opens a Medicare office in Bankstown in 1984.Credit:Martin Brannan

But more than two years into the COVID-19 pandemic, the challenges facing our health and hospital system are mounting, with workforce shortages, delayed surgeries and the demands on our health care system an escalating challenge for the federal budget.

Current Treasurer Jim Chalmers frequently reminds us health care – along with interest payments, aged care, defence and the NDIS – is one of the five key spending areas putting pressure on a federal budget stuck in structural deficit.

So is Medicare financially sustainable?

A recent series by investigative journalist Adele Ferguson revealed that about $8 billion, or roughly 30 per cent of Medicare’s annual budget, is being rorted from the scheme each year by medical practitioners making mistakes or charging for services that aren’t necessary.

Health Minister Mark Butler has since launched an independent inquiry into Medicare fraud, errors and over-servicing but, in an interview with this masthead, won’t be drawn on where that inquiry will land.

“I’ve said I’d have an interim report before the end of the year and a final report in February, which is pretty quick,” Butler says.

Following those revelations, former deputy chief medical officer Nick Coatsworth wrote recently in these pages that “we do have a Medicare crisis” and accused the Australian Medical Association of protesting too much at the allegations.

Coatsworth says the fundamental question Australians need to think about is “what does Medicare mean, and what do we want it to mean into the future?”

Dr Nick Coatsworth says Australia needs to ask a fundamental question about Medicare: is it universal or a safety net?Credit:Alex Ellinghausen

“Are we committing to a truly universal system, or are we moving towards a Howard-esque ‘this is a safety net’? When you unpack what is truly universal in Australian healthcare, ie. free for everybody, there is very little aside from acute hospital services, which isn’t really Medicare-funded anyway,” he says.

“If we make the general assumption that there has to be a limit on what we spend … the only way you can make it go further is through efficiencies.”

To do that, Coatsworth says, spending on low-value care – that is, procedures that are either outdated or that don’t provide great outcomes for patients – needs to be frozen or even wound back, with the money saved given to general practice.

Butler also has a separate “Strengthening Medicare Taskforce” – announced by Labor during the election campaign – due to report back to him by year’s end. Comprising eminent medical experts and chaired by Butler, it is meeting on a monthly basis and the minister promises “we’ve got money in the contingency reserve [in the budget], you know, our election commitment to strengthen Medicare, that will start flowing in next year’s budget”.

All told, there will be close to $1 billion extra to spend to improve access to GPs, reduce pressure on hospitals, better manage chronic conditions and invest in GP practices.

But free health care doesn’t come cheap.

According to the Australian Institute of Health and Welfare’s most recent Health Expenditure report, Australia spent $202.5 billion on health in 2019-20. That included $83.5 billion on hospitals and $66.9 billion on primary care – that is, trips to the GP, nurses, pharmacists and dentists.

Of that, $86.4 billion was spent by the federal government, a 5.6 per cent year-on-year rise in spending, and $56.2 billion by the states, a 4 per cent year-on-year rise.

Minister for Health and Aged Care Mark Butler is promising a funding boost to Medicare in the next budget.Credit:Alex Ellinghausen

The AIHW’s figures only capture the first six months of the pandemic: since then, federal and state governments have had to spend billions more on their pandemic response.

A Grattan Institute paper by health economist Dr Stephen Duckett, published in March 2022, shows Australia relies more heavily than similar OECD countries on out-of-pocket payments for health care and that hundreds of thousands of Australians had missed a prescription or a medical consultation in 2020-21 because of cost.

The AMA’s president Stephen Robson says the way people use the healthcare system has fundamentally changed in the decades since it was set up.

“If we look at general practice, which is the backbone of things, there’s just been a fundamental change in the nature of what people treat … it was for discrete episodes of care: people go and see a GP, I’ve got a cold, some symptoms, whatever. But now, we know that there are a huge number of chronic ongoing conditions that need care,” he says. “The classic things of diabetes, mental health disorders, hypertension, chronic problems, that just mean people have to see doctors all the time.”

On top of that, the pandemic has “turbocharged … the acute demand on hospitals, which of course, diminishes the capacity to deal with elective surgery”.

As a consequence, Robson says there are hundreds of thousands of people who need a procedure but are still waiting in line.

While the May 2019 end to the freeze on the rebates paid to GPs was welcome, Robson says many GPs are still struggling to keep pace with rising costs.

At present, GPs receive a payment of $39.10 for a typical “level B” consultation of six to 20 minutes, but the AMA has recommended they charge $86, a little more than twice the Medicare payment amount, to cover the cost of running their practice.

Professor Stephen Duckett believes Medicare is sustainable.Credit:Jeremy Piper

“I think we need a mechanism that sets the rebate to reflect the cost of providing the service. And that’s just not in place at the moment. It’s just an arbitrary decision from the minister,” Robson says.

Duckett, an honorary professor at the Melbourne School of Population and Global Health, who is a member of the government’s Medicare taskforce, says the system has served Australians well and that “it’s not massively expensive, despite what people may say”.

In his view, the system is financially sustainable. But he does have a laundry list of changes he’d like to see introduced to revamp how the system works, so it’s fit for purpose in the 2020s.

They include the voluntary enrolment of people in a specific GP clinic, an independent mechanism for setting the rebate paid to GPs – both ideas backed by the AMA – and a greater use of other health professionals, including nurses and pharmacists, and expansion of digital health services.

“On the hospital side, the states say they can’t cope with increased demand. My response to that is they have to pull their weight if there is to be an increase in funding of the public hospital system,” he adds.

“On the specialist side, we have to recognise that the market has changed a lot in the last 60 or so years. We have to think about what is the right way to fund corporate pathology and radiology, and it is not [the current] uncapped fee-for-service system. We have to look at new ways of funding them to get some price competition into the market.”

One of the perennial options canvassed to help address the rising costs of Medicare has been a universal co-payment. A $2.50 co-payment for a visit to a GP was first introduced in the final days of the Hawke government, in November 1991: the unpopular measure lasted a little less than five months and was junked by Keating’s government in March 1992.

In the notorious 2014 budget, the Abbott government attempted to introduce a $7 co-payment, but after a furious public backlash the measure was dumped in a matter of months.

In 2014, the AMA labelled the GP co-payment “flawed and unfair” and Robson is cautious about revisiting the idea now. “I think the answer on co-payments is, if you’re going to consider something like that, then it has to be done in such a way that the people who constantly need a lot of care are not going to be disadvantaged,” he says.

He does not completely rule out a co-payment. “We’re in a position where lots of different things need to be considered. And I think at the end of the day, the government’s got to say, ‘Well, look, you know, where do we sit? What sort of system do we want?’”

Butler is not at all interested in introducing a universal co-payment – it isn’t an option the Strengthening Medicare Taskforce is considering.

He points out that his predecessor as health minister, Greg Hunt, liked to trumpet the fact that about 88 per cent of GP consultations were bulk-billed. While accurate, Butler says the figure was misleading, as about two-thirds of patients are bulk-billed in Australia.

“All the vaccines were bulk-billed, telehealth had to be bulk-billed. So the big advent of telehealth lifted rates as well. But what everyone accepts is that bulk-billing is in sharp decline, the data is starting to show that,” he says.

Despite the growing challenge, Butler is adamant: “I’m not raising the white flag on bulk-billing.

The modern general practice is facing strong headwinds.Credit:Brendan Esposito

“We want to have a system that preserves bulk-billing for as many Australians as possible, particularly … concession cardholders, pensioners and so on.”

What the taskforce is considering, Butler says, is how to shift the emphasis of the Medicare system to deal with an older population with more chronic disease – as Robson also suggests it must – and strengthening the relationship between a patient and a medical practice, including doctors, nurses and even pharmacists.

In practice, that could lead to people being voluntarily “enrolled” at a particular GP clinic to better manage chronic conditions and better use of digital health records, so a patient’s records – for example, their blood test results – are more easily accessible to them and their clinicians.

Coalition health spokeswoman Anne Ruston says Australians expect the system of universal healthcare to be maintained by the new Labor government and points out the former government increased spending on Medicare alone from $19 billion in 2013 to $34 billion in 2021.

For Ruston, the fundamental question facing Australia’s medical system – and the challenge for Butler as minister – is the extent to which the GP workforce and primary healthcare can meet the demands it is facing.

“Right now the crisis that is before us is about ensuring the sustainability of the GP workforce and making sure it’s financially sustainable,” she says.

“The responsibility of government is to protect taxpayer dollars, but the outcome every Australian wants is to focus on good patient outcomes.”

While Butler concedes there is “enormous pressure” on the health system, and GPs in particular, he sheets blame to the former government for the six-year rebate freeze, which began under the previous Labor government and was maintained by the Abbott and Turnbull governments.

“You’ve got the impact of that [rebate] freeze, squeezing the financial viability of GPs. You’ve got the added pressure of the pandemic … And in the background, you’ve got this quite structural change in our health, an ageing population with a fast-rising incidence of complex chronic disease,” he says.

“Those things [are what] the task force is considering – how do you shift the emphasis of the Medicare system on to the real needs … 40 years on?”

Answering that question will help ensure Medicare remains sustainable.

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